GM says Chrysler deal continues to be set aside

GENEVA – General Motors Corp has not revived consideration of a merger with smaller rival Chrysler LLC since calling off negotiations toward a deal last year, a senior executive said on Tuesday.

We set it aside, it continues to be set aside, GM Chief Operating Officer and President Fritz Henderson told reporters on the sidelines of the Geneva auto show.

GM and Chrysler had considered a merger last fall that would have combined the operations of the U.S. No. 1 and No. 3 automakers struggling with declining sales and excess capacity.

The proposed deal ran into difficulty because financing was not available and the GM board moved to scrap consideration of the merger in November to focus on attempts to shore up its own fast-diminishing cash position.

GM and Chrysler have both been kept in operation since the start of the year with emergency funding from the federal government.

GM has requested up to $30 billion in such aid. Chrysler, which is controlled by private equity firm Cerberus Capital Management, has requested up to $9 billion.

Chrysler has also been pursuing an alliance with Italy's Fiat SpA expected to close by the end of this month when U.S. officials are due to render a verdict on whether it can be made viable with new loans.

Chrysler said in a restructuring plan submitted to the U.S. Treasury last month that it had considered a merger with GM to be the best available option, sparking some speculation that consideration of a deal could be revived under federal oversight.

GM and Chrysler are racing to complete debt restructuring deals with creditors and the United Auto Workers union by the end of the month.

Both have reached tentative deals with the auto union on changes to a contract expiring in 2011 intended to allow them to cut costs and close plants more quickly.

The terms of those tentative agreements have not been disclosed by the UAW or the companies.

But UAW-represented workers at Ford Motor Co, the only U.S. automaker that has not resorted to federal aid, have begun voting on a parallel contract that offers new product pledges in a bid to preserve union jobs in exchange for concessions.

We already announced in our February 17 (restructuring) plan that we reached agreement on all the contractual issues with the UAW, Henderson told reporters.

When asked, Henderson said GM's operational deal on cost concessions with the union also included pledges to build certain planned future vehicles in U.S. plants like Ford's agreement.

Right, he said, in answer to the question.

But he said GM has not reached a deal with the union to cut the more than $20 billion in cash it owes to a trust fund for retiree health care, commonly known as a VEBA plan.

We don't have any agreement today on the VEBA, Henderson said.

(Reporting by David Bailey, writing by Kevin Krolicki in Detroit, editing by Dave Zimmerman)